Small Account Challenge Day 9: +$97 Selling Too Early

Just an FYI I’m numbering these days based on calendar day, not trading day. I want to see my results over the course of 180 calendar days. This blog is more for me than it is for you, I just believe that there are a lot of other people out there like me who will be going through the same challenges I will be so why not document it and help somebody?

Ok, today was a good day. I played $ABIO as an overnight hold and sold in the first five minutes of the trading day for a 9% gain. Made $97, and you would say hey 9% gain that’s great for less than five minutes of trading.

Remember my rule, no crying over missed profits.

I’m not going to do that, but what I am going to do is talk about two things. The first, trading scared.

$ABIO was up over 50% in the first hour of trading today. So when I say selling too early, I sold too early. But how do you know? I knew it as soon as I sold. The volume was there, the 5-minute chart confirmed it was a bull play. So why didn’t I hold? Because I’m trading scared, and that’s not a bad thing. At 9:32 the stock had a scary drop back to the opening price. If it held that drop, it was to the bottom from there. At 9:33 it repeated that drop back to opening support. I have lost a lot of money over the last eight months of trading, and I have just had my first green month in February. The reason I’ve been green is trading scared. When it rose back up on the next 1-minute candle I sold.

Now, most day traders would say, hey the next 1-minute candle made a new high, despite touching support it made higher highs so stay with it. That’s how I knew I sold too early, but I’ve been burned losing a lot of money by not being cautious enough. So my strategy starting in February was to be overlycautious and do not care about missing profits, just hit my target (3% a day). And the last two weeks I’ve found a strategy that is working for me and I’m hitting my target!

What I’m doing at the same time, however, is I’m gaining enough experience in my one strategy that I’m becoming more and more confident about identifying which way a stock is going to go and playing into that. So although I didn’t play the hold all the way up to 0.97 from 0.63, I made money while also feeling more comfortable with my ability as a trader. And that’s important.

Oh, and I have to work a full-time job for a living so watching the stock for about 5-10 minutes is, unfortunately, all the time I have.

The second thing I want to talk about is, how would I have played it?

So take a look at the 1-minute chart below. You’ll see the doji at about 3 minutes which is where I sold, at 0.695. That’s a neutral sign and that’s where I sold, locking in profits and playing it safe. Now that I’m looking at it, that was probably a little hammer so even better. There was major resistance at 0.70 so that’s also why I sold there. However, it was within the first five minutes and I knew that if it broke that resistance level, the next one was at 0.75. And if it broke that, the next one was at 0.80. And if it broke that, the sky was the daggum limit. You have to know and pre-map your support and resistance levels before trading begins so that you can make these decisions quickly, it’s why I rely on using TC2000 so much because it makes that easy and functional.

It also lets me easily look at a 1-minute, 2-minute, 5-minute, and or a daily chart all at the same time with all different indicators and studies. That’s invaluable, and I’m grabbing now the level 2 data and the times and sales data from Thinkorswim in pop-out windows so they’re there. If you read yesterday’s post you’ll remember I wasn’t able to see the signs because I was using Thinkorswim exclusively instead of using TC2000 and I was not confident at reading my intraday chart. But this morning, it was butter.

So once it broke 0.70 you expect some pullback, and it did. But it was a perfect bullish pullback sign, the kind everyday trader watching this chart right now is about to throw a bunch of money at. And I almost bought-in right there at about 9:37 am, but I didn’t because I had to get up and start working.

Boom breaks 0.70, perfect pullback, pushes up now it needs to break 0.75. And at 9:39 comes the next surge because everyone just bought at 0.70 after the dip and it immediately busts 0.75 up to 0.80. Major resistance at all three of these levels and it broke them all in less than ten minutes. At this point, a lot of people sell at 0.80 or just under because that’s a huge move in ten minutes, 23% from close. So you expect a little consolidation, and it does. Drops back to 0.75 another beautiful bull flag pattern and it bounces to 0.78 but that’s a lower high. So it drops back to the next support level at 0.70. Most likely I would have sold all my position at 0.79, just under 0.80, and I’d be out.

There are a few things that would happen at this point. Either, a) the stock breaks down at that prior resistance, drops below VWAP and all the shorters start shorting it like sharks attacking blood in the water. Or, b) it goes sideways for a while and makes its mind up later in the day which way it’s going. So we’re all going to sit there and watch what happens for a minute, looking for another signal. So it does pop below VWAP for a second and the shorters mouths start to water. Now, if those in a long position see this as too much weakness and begin selling, or their stop losses start kicking in because they bought in at 0.75, it’s done. Toast. Astalavista baby. But it doesn’t. Instead, it bounces right back up and closes a nice green candle the next minute. Then another, then another, and another. A little pullback and it taps that 0.75 resistance now support. Does that twice, once at 9:57 and again at 9:59. The 10 am candle is green and what happens? People start going long again because that’s a great sign. You can see the volume right after that shoots up. The sky is the limit.

Now from there, the next logical resistance level is at 0.90. Depending on my tolerance level (I would have moved my stop loss up as it climbed because you can very quickly get caught in a falling knife) I would have either had a sell order in at 0.90, because that’s crazy high. Or I would have held through 0.90 to see what happens if it can hit $1. Crazy resistance at $1 and the highest volume bar is at its peak when huge players sold between 0.90 and 0.97. Seeing that huge sell-off (giant red doji at the top of the 5-minute chart) if I was crazy I would hold to see what the next candle was, and sell then. But most likely seeing that huge doji would have put my thoughts immediately to sell sell sell. And, crazily enough, it didn’t nose-dive after that but instead consolidated some. So I know a lot of people held on seeing it consolidate at around an almost 40% gain.

Instead of a $97 gain, had I played it the way I wanted to. I would have sold after seeing it bounce off the 0.80 resistance, probably around 0.77 for a $228 gain. Then, after seeing it get back in play I would have bought back in around 0.74 and sold right at 0.90 or a little over for another $300 profit. For a total of $528 profit in fifty-three minutes, starting with $1,100 in cash which would be one hell of a morning.

However, playing it safe when you aren’t 100% confident yet is the best strategy and it’s why I have that cash to play with now. Even better, watching a stock play out perfectly and being confident about it boosts your confidence level in what you’ve learned that I can confidently say that’s how I would have played it. Most stocks will not blow up 50% in an hour so even more important, to me, is knowing when it’s NOT that stock and just sitting on the sidelines.

What I have gotten most out of today is a realization that I can quickly identify the patterns I’ve become comfortable with, and knowing I can play those patterns with confidence. The next level for me is being satisfied with 3% per day profits, but also making plays like this one when they present themselves so I also get a boost when it’s available. A 40-50% boost in your account is huge. But still not crying over missed profits if the patterns don’t fit my confidence level. I have a lot left to learn.

Hopefully running through that helped you some. I will say that without TC2000 and looking at multiple time-frames at once, I’m not as confident. So for the little bit that it costs me to use that tool I couldn’t trade without it. I like that I have it customized to exactly how I want to see it. I’ll try and post an article with my layouts.

That puts my small account balance at $1,224.69. That’s 22.4% gain since I started a week ago.

Blow this chart up and follow along, let me know if you see anything I missed I’m always wanting to learn!